The Economic Effects of Public Financing: Evidence from Municipal Bond Ratings Recalibration

• 成果类型: Article
• 署名作者: Adelino, Manuel; Cunha, Igor; Ferreira, Miguel A.
• 署名单位: Duke University; University of Kentucky; Universidade Nova de Lisboa; European Corporate Governance Institute; Center for Economic & Policy Research (CEPR)
• 刊物名称: REVIEW OF FINANCIAL STUDIES
• ISSN/ISSBN: 0893-9454
• DOI: 10.1093/rfs/hhx049
• 发表日期: 2017
• 页码: 3223
• 关键词: credit ratings; american recovery; certification; multipliers

摘要

We show that municipalities' financial constraints can have a significant impact on local employment and growth. We identify these effects by exploiting exogenous upgrades in U.S. municipal bond ratings caused by Moody's recalibration of its ratings scale in 2010. We find that local governments increase expenditures because their debt capacity expands following a rating upgrade. These expenditures have an estimated local income multiplier of 1.9 and a cost per job of $20,000 per year. Our findings suggest that debt-financed increases in government spending can improve economic conditions during recessions. (JEL E24, G24, G28, H74)